The World Bank's latest Commodity Markets Outlook, released last week and continuing to ripple through markets Monday, projects a 24% annual increase in energy prices for 2026 — the sharpest since the 28% surge in 2022 following Russia's invasion of Ukraine. The report attributes virtually all of the upward revision to the Iran conflict and the effective closure of the Strait of Hormuz, which has disrupted approximately 20% of global crude oil flows and a significant share of LNG shipments.
The institution models three scenarios. The baseline assumes a diplomatic resolution by Q3 2026 and projects Brent crude averaging $102 for the full year. The 'prolonged disruption' scenario — which the report characterizes as 'increasingly likely' — projects a $115 average and a 2.1-percentage-point hit to global GDP growth. The severe scenario, involving direct military conflict expanding to include Saudi Arabian infrastructure, projects $140 oil and a global recession.
Beyond Oil: LNG and Petrochemicals
The report highlights under-appreciated second-order effects. Qatar, the world's largest LNG exporter, ships approximately 80% of its output through the Strait of Hormuz. Asian LNG spot prices have risen 42% since the conflict began, with Japan and South Korea particularly exposed. European natural gas benchmarks (TTF) have risen 28% as Asian buyers compete for Atlantic-basin cargoes, reviving memories of the 2022 energy crisis.
Food Price Transmission
Energy price increases are transmitting to agricultural commodities through fertilizer costs. Natural gas is the primary feedstock for nitrogen fertilizers, and the World Bank estimates fertilizer prices could rise 15-20% by Q3 if gas prices remain elevated. This creates a food-security risk for emerging markets that are simultaneously dealing with dollar strength and tighter financial conditions.
Outlook
The IEA's Emergency Response system has not been formally activated, though member countries have released 60 million barrels from strategic reserves since March. The U.S. Strategic Petroleum Reserve stands at 372 million barrels — up from its 2023 low of 347 million but well below the 600+ million barrel levels of the pre-2022 era. Tuesday's OPEC+ emergency meeting will determine whether the cartel releases additional spare capacity, with Saudi Arabia and UAE holding an estimated combined 3.2 million barrels per day of unused production.